risk acceptance


risk acceptance
An informed decision to accept the *risks (and *rewards) of an activity or *market. For example, the risks of operating in high technology markets can be extremely high, owing to the danger of rapid *product Obsolescence, but markets of this type can offer extremely attractive *returns to its *risk-seeking participants. Risk acceptance decisions can also occur on geographical lines. In the period following the Argentine financial crisis that started in late 2001, for example, some *multinational corporations may have been tempted to pull out of the country on the basis of unacceptably high economic and political risks. On the other hand, some investors justified continued activity in Argentina on the grounds of a long-term view of that country’s economic health. Pulling out of a market only to re-enter it later can be a more costly option than remaining throughout a period of crisis. Contrast *risk avoidance.

Auditor's dictionary. 2014.

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